Termination Rights, Royalty Distributions, Ownership Transfers, Disputes, and the Music Modernization Act
On October 25, 2022, the U.S. Copyright Office published a notice of proposed rulemaking (NPRM) regarding the applicability of the derivative works exception to termination rights under the Copyright Act to the statutory blanket mechanical license established under the Music Modernization Act (MMA). On September 26, 2023, the Office published a supplemental notice of proposed rulemaking (SNPRM) modifying the NPRM and expanding its scope.
The Copyright Act permits authors or their heirs, under certain circumstances and within certain windows of time, to terminate copyright grants, including transfers or licenses. This rule is subject to an exception that allows derivative works prepared under the authority of a grant before its termination to continue to be utilized under the terms of the grant after its termination (the “Exception”).
The Office believes that songwriters, music publishers, and the mechanical licensing collective (MLC) would benefit from guidance regarding the appropriate application of the Exception in the context of the mechanical blanket license. Few court cases have interpreted the Exception, all such cases have predated the MMA, and no case has dealt directly with the application of the Exception to a statutory license.
The Office’s NPRM proposed to clarify that the appropriate payee under the mechanical blanket license to whom the MLC must distribute royalties in connection with a statutory termination is the copyright owner at the time the work is used.
The Office’s SNPRM proposes some modifications to its earlier NPRM, including by expanding its scope to address additional matters relevant to identifying the proper payee to whom the MLC must distribute royalties. These include the MLC’s administration of ownership transfers, requests to designate alternative royalty payees, and related disputes, as well as the distribution of matched historical royalties.
Initial written comments responding to the SNPRM were due on November 8, 2023. Written reply comments were due on December 5, 2023.